In Illinois, Payday Loan Providers Adjust to New Laws
By J.J. CameronPayday Loan Writer
If you specialize in providing payday loans in Illinois, you have two choices when faced with new regulations:
- Cry and complain
- Adjust your lending strategies
In Kane County, it's become increasingly difficult to earn a living since Illinois legislators passed a law placing limits on short-term cash loans in 2005.
But if you ask Rhona Benau, district manager of All American Cash Advance in Elgin, there are prosperous, helpful alternatives. She's resorted to giving out six-month loans instead of the savings account payday loans that required payment with interest within days.
"We had no choice, we were told to stop doing it," Benau said. "But it really is better for the customer."
In the past, critics blamed payday loan services for taking advantage of customers by granting them loans with high interest rates. Although some providers of the no fax payday loans said politicians have unfairly targeted their industry, lenders such as Benau said they were indifferent to the change because their businesses hadn't suffered setbacks.
The law includes a fee cap to reduce the cost of using payday loans, an industrywide cap on borrowing, a recovery period to break the cycle of debt, a repayment plan to help borrowers in increasing debt, and a statewide consumer reporting service for enforcement.
Since legislation was passed in 2005, Kane County lenders have either adhered to Illinois' restrictions or stopped granting them altogether.
"We're in a good business; our customers keep coming back regardless," Benau said. "We're like bartenders, we know everything about them."
Repeat customers are part of the problem when considering what cash loans do for an individual already in debt. Although most lenders, such as Benau, claimed that they won't give borrowers multiple loans at one time, one of the new law's functions was to place a maximum loan limit on borrowers.
These individuals can go to any number of lenders and keep borrowing until they max out their borrowing limit, which is either 25 percent of gross monthly income or $1,000.
Customers also are allowed to extend the payday advance and pay more fees, the attorney general's office said.
"The overall goal simply is to prevent people from remaining in a cycle of short-term loans," said Deborah Hagan, the division chief for consumer protection for the Illinois attorney general's office. "The goal is not to eliminate the product."
Payday loan stores are not as common in Kane County as they are in cities such as Chicago and Rockford. Since the legislation was passed in Illinois, even fewer stores are granting payday loans.
Yet Steve Brubaker, the executive director of the Illinois Small Loans Association, said the state's reforms would not make people's money problems disappear.
"They've done nothing to remove that consumer's need for short-term credit," Brubaker said. "People will revert to what they did before the payday loan industry came along, and that's bouncing checks and incurring overdraft fees."
